One penny share for thrill-seeking investors

Investing in penny shares can be a bit of a rollercoaster ride. That’s literally the case for one London-listed company, which hopes to make a fortune for its investors by backing a new theme park in Italy. Can it succeed? Tom Bulford takes a look.

It takes companies of all sorts to make up the penny share universe. In ten years of sifting through this most intriguing quarter of the market I have come across all sorts of wacky ideas and interesting characters. Companies that want to pull treasure from ancient shipwrecks, companies that want to launch rockets out of the atmosphere, septuagenarian adventurers trekking in search of gold…

But they don’t come much stranger than Brainspark (LSE: BSP). This stock market tiddler has a board consisting mainly of Italian businessmen. It has a shady Swiss investor, operations all over the world and a history that would make all but the most forgiving investors run a mile.

It also stakes an unusual claim. It is the first Aim-listed company to have stipulated that 5% of pre-tax profits must go to an authorised charitable organisation. So recipients of aid handed out by ‘Homes 4 Hope’, which persuades the US construction industry to build homes without receiving anything in return, have a vested interest in its future.

How this penny share tiddler plans to become a £50m company

Brainspark’s mission is to create a £50m company. Given that its present value is only £5m, this will be quite a stretch. But recently things have been moving in the right direction. The share price has advanced from 0.1p a year ago to the heady heights of 0.6p. Some investors have been happy to pump more money into Brainspark at ever rising prices.

Central to their hopes is a large plot of land halfway between Turin and Milan in northern Italy. This is a well-populated region and Brainspark has plans for an attraction that will persuade the surrounding population to visit it. Brainspark reckons that 12 million people are within a two-hour drive of this site, while a four-hour drive would net no fewer than 45 million. The question is – what will make them want to make the journey?

Brainspark believes that a fair number of them will, because this plot of land is the intended site of Mediapolis, a major new theme park.

Mediapolis is the invention of architect Sergio Porcellini. For the last ten years, he has been fighting his way through the mire of Italian planning regulations to obtain the necessary approvals. This has not exhausted the enthusiasm of Signor Porcellini, but it has made a big dent in his financial resources, giving Brainspark the chance to buy into the project at what could prove to be a bargain price.

Why Brainspark’s big idea is attracting investors

But will they be building something worth visiting? I will let you make up your own mind. Here is how Brainspark describes Mediapolis. It will be a “Social Network Park… where the dynamics used in the virtual world can be mixed with ones of the real world through partnerships and agreements with major players in social networks, linking for the first time the virtual world with the real world”.

I asked Signor Gardin what that meant exactly, and he gave me this example. Suppose you have been sitting at home engaged in a virtual reality motor car race. What better than to then go to a theme park where you can test your skills for real?

This all sounds a bit vague and contemporary, but a theme park is a theme park and Brainspark has high hopes for this £250m project. But its plans do not end there. It wants to build another theme park in China’s Xian, “aiming to recreate the atmosphere of the Venice of Marco Polo”, and, in an unfortunately worded phrase, says that it would like to buy minority stakes in growing companies “which are owned mainly by reputable shareholders”.

Already it has a number of these. They range from the Rosso Pomodoro chain of Neapolitan-themed restaurants, which seems to be fairly successful, to the AIM-quoted Indian Restaurant Group, which does not.

Then there are investments in Italian media and television companies, a 5% stake in a 68-storey construction project in Abu Dhabi, and a business called GeoSim. This company uses satellite images to create 3D models of cities. So the investment backing is, as they might say in northern Italy, a bit of a risotto.

How this will unfold in the coming years we will have to wait and see. But it can hardly do worse than Brainspark’s two previous adventures, which involved making large losses in the dot-com sector, followed by a disastrous foray into private equity investment in China. Brainspark’s long suffering shareholders are clearly made of strong stuff. Let’s hope it is third time lucky.

This article
was written by Tom Bulford, author of the
Red Hot Penny Shares
newsletter, and is taken from his free daily email
The Penny Sleuth

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